AI investments are booming, so why are cyber valuations still higher?
Despite AI’s rapid rise, cyber companies continue to lead in early-stage fundraising, altshare data shows.
The biggest trend in high-tech investments over the past year has been cyber and artificial intelligence (AI) companies. Surprisingly, however, AI companies are receiving significantly lower valuations compared to cyber and fintech companies. This insight comes from data collected by altshare, a fintech company that develops an equity management platform for companies, investors, and entrepreneurs. According to the report, cyber companies command higher valuations in Seed funding rounds, which are often the first significant fundraisers for a company.
According to data from altshare, based on dozens of companies that raised capital in the first half of 2024, shows that 64% of these companies raised funds during the Seed and Series A stages. At the Seed stage, the cybersecurity sector led with the highest percentage of investments, 43%, and a median investment size of $7.25 million. Biotechnology and health tech were at the bottom, attracting only 10% of investments with a median investment size of $4.5 million. AI, despite being relatively new, ranked second, accounting for 27% of investments with a median investment size of about $5 million. In Series A funding, AI moved into first place, accounting for 49% of investments with a median investment size of $14.8 million, while cybersecurity dropped to 21%, with a median investment size of $13.5 million.
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However, when it comes to company valuations during seed funding, AI companies are ranked only fourth. Cyber companies receive valuations ranging from a minimum of $10 million to a maximum of $50 million, with a median value of approximately $16 million. In contrast, AI and data-driven technology companies raise funds in the Seed stage with valuations between $3.3 million and $24 million, with a median value of $15.5 million.
"From the data we’ve gathered, it’s clear that fintech and cyber companies achieve higher valuations in the Seed stage due to large-scale solutions catering to a broad audience, whereas AI companies are more focused on niche areas," says Ronen Solomon, founder and CEO of altshare. According to Solomon, the business plan, product, entrepreneur, and the state of the market determines the company's valuation in the early stages. "In the Seed stage, there is more uncertainty, but in the later stages, when forecasts and products are more established, these factors carry greater weight, which is why we see higher valuations for AI companies in the Series A stage."
He adds that another reason for the difference in valuations is that fintech and cyber sectors are more mature, with larger companies, while AI is relatively new and highly fragmented.
